With the base of demand for new cars growing substantially over the past five years and overall rates of economic growth expected to remain buoyant, the remaining months of 2006 are likely to yield further record-breaking months for new-vehicle sales, according to vehicle manufacturers.
This July was the best to date for the country’s motor industry. According to the National Association of Automobile Manufacturers (Naamsa), total vehicle sales grew by 20,8% year-on-year in July, seven percentage points ahead of annual growth in June, which yielded an all-time record sales month.
Growth in passenger cars and commercial vehicles also outpaced that in June, both rising 20,8% year-on-year in July from respective increases of 18,7% and 5% the month before. The contraction in the monthly sales performances, however, may be pointing towards the much-anticipated slowdown in sales, as the impetus behind successive record sales months slowly starts dissipating, according to Standard Bank.
The bank said on Wednesday that, as a barometer for overall demand, vehicle sales continue to reflect the lively pace of consumer and business activity in the economy, while indicating that sentiment in the economy has not turned sour.
“Factors such as the recent monetary-policy tightening, expectations for more rate hikes this year, and a relatively weaker rand exchange rate, resulting in higher car prices, are paving the route for further consolidation in the figures. The vehicle market is therefore expected to continue expanding at a fairly robust rate, albeit somewhat slower than last year’s rates,” Standard Bank added.
Volkswagen of South Africa sales and marketing director Mike Glendinning said July’s performance would have been strongly supported by sales to rental car companies, a characteristic that would continue to buoy demand for new cars through the months of October and November.
“With the base of demand for new cars growing substantially over the past five years and overall rates of economic growth expected to remain buoyant, the remaining months of 2006 are likely to yield further record-breaking monthly markets,” he said.
However, according to Brand Pretorius, chairperson of McCarthy Motor Holdings, the market is continuing to show signs of a gradual slowdown.
“When looking just at the Naamsa results, July’s sales performance was almost a percent weaker than the sales recorded during June, even though July had a half-day more in which to sell vehicles,” Pretorius said.
Ronnie Watson, CEO of vehicle and asset finance house WesBank, added that the marginal decline in growth was attributable to a decrease in passenger-vehicle sales, which indicated that the recent interest rate hike had affected consumer spending.
“Despite this, we continue to see a steady increase in LCV [light commercial vehicle] sales, which points to the continued strength of our economic growth,” he said. “Added to this, the figures represent a 19,5% growth over the same period last year and the motor industry will still see record sales for 2006.”
According to McCarthy’s Pretorius, interest-rate movements over the next couple of months will heavily influence prospects for the remainder of the year.
“History has shown that the new-vehicle market is especially sensitive to interest-rate increases. Interest-rate hikes not only affect vehicle affordability, but also have a significant influence on business and consumer confidence,” said Pretorius.
Nevertheless, Pretorius believes the South African motor industry is still on track to break through the 700 000-unit barrier for the 2006 calendar year. — I-Net Bridge